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Board of Trs. of IBT Local 863 Pension Fund v. C&S Wholesale Grocers Inc.

United States District Court, D. New Jersey

March 19, 2014

BOARD OF TRUSTEES OF THE IBT LOCAL 863 PENSION FUND, Plaintiff,
v.
C& S WHOLESALE GROCERS INC. WOODBRIDGE LOGISTICS LLC, Defendant

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For BOARD OF TRUSTEES OF THE IBT LOCAL 863 PENSION FUND, Plaintiff: FLAVIO L. KOMUVES, LEAD ATTORNEY, ZAZZALI FAGELLA NOWAK KLEINBAUM & FRIEDMAN, NEWARK, NJ; KENNETH I. NOWAK, LEAD ATTORNEY, ZAZZALI, FAGELLA, NOWAK, KLEINBAUM & FRIEDMAN, PC, NEWARK, NJ.

C& S WHOLESALE GROCERS, INC., Consol Plaintiff, Pro se.

For WOODBRIDGE LOGISTICS LLC, Consol Plaintiff: GRACE GUICHARDO, LEAD ATTORNEY, LITTLER MENDELSON PC, PHILADELPHIA, PA.

For C& S GROCERS, INC/WOODBRIDGE LOGISTICS LLC, Defendant: GRACE GUICHARDO, LEAD ATTORNEY, LITTLER MENDELSON PC, PHILADELPHIA, PA.

For IBT LOCAL 863 PENSION FUND, Consol Defendant: FLAVIO L. KOMUVES, LEAD ATTORNEY, ZAZZALI FAGELLA NOWAK KLEINBAUM & FRIEDMAN, NEWARK, NJ; KENNETH I. NOWAK, LEAD ATTORNEY, ZAZZALI, FAGELLA, NOWAK, KLEINBAUM & FRIEDMAN, PC, NEWARK, NJ.

OPINION

Page 709

JOSE L. LINARES, U.S. DISTRICT JUDGE.

This matter comes before the Court by way of Plaintiff the Board of Trustees of the IBT Local 863 Pension Fund (the " Board" ) and Defendant C& S Wholesale Grocers, Inc./Woodbridge Logistics, LLC (" Woodbridge" )'s cross motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. (Pl.'s Mot. for Summ. J., ECF No. 33; Def.'s Mot. for Summ. J., ECF No. 34). The Court has considered the parties' submissions in support of and in opposition to the instant motions and decides this matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, the Board's motion is GRANTED in part and DENIED in part. Likewise, Woodbridge's motion is GRANTED in part and DENIED in part.

I. BACKGROUND

This case centers on a dispute over the proper interpretation of section 4219(c)(1)(C)(i) of the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1399(c)(1)(C)(i). In brief, that section provides a formula for calculating an employer's annual payment to a multiemployer pension plan after its withdrawal from the plan. The parties offer conflicting meanings of one of the two variables in that formula, " the highest contribution rate." The Court must now decide which meaning is correct. As it is impossible to understand this case without some background on ERISA, the Court begins with an overview of ERISA's statutory framework.

A. ERISA's Statutory Framework

ERISA is a comprehensive statute that regulates employee retirement plans. See generally 29 U.S.C. § 1001 et seq. Congress enacted ERISA to ensure that " if a worker has been promised a defined pension benefit upon retirement--and if he has fulfilled whatever conditions are required to obtain a vested benefit--he actually will receive it." Nachman Corp. v. Pension Benifit Guar. Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980). Among the types of employee retirement plans that ERISA regulates are multiemployer pension plans, " in which multiple employers pool contributions into a single fund that pays benefits to covered retirees who spent a certain amount of time working for one or more of the contributing employers." Trs. of the Local 138 Pension Trust Fund v. F.W. Honerkamp Co. Inc., 692 F.3d 127, 129 (2d Cir. 2012). In order

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to combat threats to the solvency of multiemployer pension plans, Congress amended ERISA by enacting the Multiemployer Pension Plan Amendments Act of 1980 (the " MPPAA" ), Pub. L. No. 96-364, 94 Stat. 1208, and the Pension Protection Act of 2006 (the " PPA" ), Pub. L. No. 109-280, 120 Stat. 780.

1. The MPPAA

The MPPAA added sections 4201 through 4225 to ERISA. 29 U.S.C. § § 1381-1405. Before Congress passed the MPPAA, employers had a strong incentive to withdraw from multiemployer pension plans experiencing financial difficulties. See Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 608, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993) (explaining why Congress passed the MPPAA). The MPPAA eliminates this incentive, in part, by requiring an employer who effects a " complete withdrawal" from a multiemployer pension plan to pay " withdrawal liability" payments. 29 U.S.C. § 1381(a). This " insures that [the withdrawing employer's] financial burden will not be shifted to the remaining employers" in the plan. SUPERVALU, Inc. v. Bd. Of Trs. Of Sw. Pa. & W. Md. Area Teamsters & Employers Pension Fund, 500 F.3d 334, 337 (3d Cir. 2007) (citation omitted). A " complete withdrawal" occurs when an employer either " permanently ceases to have an obligation to contribute under the plan," or " permanently ceases all covered operations under the plan." 29 U.S.C. § 1383(a). When an employer completely withdrawals from a multiemployer pension plan, the " plan sponsor," i.e., its board of trustees,[1] must notify the employer of the amount of the withdrawal liability. 29 U.S.C. § § 1382, 1399(b)(1).

In essence, the amount of an employer's " withdrawal liability" is its proportionate share of the multiemployer pension plan's unfunded vested benefits, or its " allocable amount of unfunded vested benefits." See 29 U.S.C. § 1381(b). " Unfunded vested benefits are 'calculated as the difference between the present value of vested benefits and the current value of the plan's assets.'" In re Marcal Paper Mills, Inc., 650 F.3d 311, 316 (3d Cir. 2011) (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 725, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984)). ERISA section 4211 provides various methods for calculating an employer's allocable amount of unfunded vested benefits. See 29 U.S.C. § 1391(c)(1). After calculating the withdrawing employer's allocable amount of unfunded vested benefits based on the applicable method, the plan's board must then prepare a schedule for liability payments. 29 U.S.C. § § 1382, 1399(b)(1).

Such liability payments, pursuant to ERISA section 4219(c), are made to the plan annually in level amounts. 29 U.S.C. § 1399(c). ERISA section 4219(c)(1)(C)(i) provides that the amount of each annual payment is the product of:

(I) the average annual number of contribution base units for the period of 3 consecutive plan years, during the period of 10 consecutive plan years ending before the plan year in which the withdrawal occurs, in which the number of contribution base units for which the employer had an obligation to contribute under the plan is the highest, and
(II) the highest contribution rate at which the employer had an obligation to contribute under the plan during the 10

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plan years ending with the plan year in which the withdrawal occurs.

29 U.S.C. § 1399(c)(1)(C)(i). Notably, ERISA section 4219(c)(1)(B) " limits the employer's obligation to make these payments to [twenty] years, even if it would take more than [twenty] payments for the employer to pay its full withdrawal liability." Trs. of the Local 138 Pension Fund, 692 F.3d at 130 (citations omitted). Once the plan's board has made the necessary calculations under ERISA sections 4211 and 4219, the board must demand payment in accordance with the schedule for withdrawal liability payments. 29 U.S.C. § § 1382, 1399(b)(1).

2. The PPA

" [T]he PPA includes measures designed to protect and restore multiemployer pension plans in danger of being unable to meet their pension distribution obligations in the near future." Trs. of the Local 138 Pension Fund, 692 F.3d at 130. Such measures include the imposition of an " automatic employer surcharge" if a multiemployer pension plan falls into " critical status," i.e., if the plan is less than sixty-five percent funded. 29 U.S.C. § 1085. For the first year that the plan is in critical status, ERISA section 305(e)(7)(A) provides that the automatic employer surcharge is " equal to [five] percent of the contributions otherwise required under the applicable collective bargaining agreement [(" CBA" )] (or other agreement pursuant to which the employer contributes)." 29 U.S.C. § 1085(e)(7)(A). That section also provides that for each succeeding year that the plan remains in critical status, the surcharge is equal to ten percent. 29 U.S.C. § 1085(e)(7)(A).

ERISA section 305(e)(7)(B) provides that such automatic employer surcharges are " due and payable on the same schedule as the contributions on which the surcharges are based." 29 U.S.C. § 1085(e)(7)(B). Furthermore, under that section, any failure to make an automatic employer surcharge payment is " treated as a delinquent contribution under [ERISA section 515, 29 U.S.C. § 1145,]" and is " enforceable as such." 29 U.S.C. § 1085(e)(7)(B).

To the extent that ERISA addresses whether automatic employer surcharges are included in a withdrawing employer's withdrawal liability, ERISA section 305(e)(9)(B) provides:

Any [automatic employer surcharges] shall be disregarded in determining the allocation of unfunded vested benefits to an employer under [ERISA section 4211, 29 U.S.C. § 1391,] except for purposes of determining the unfunded vested benefits attributable to an employer under [ERISA section 4211(c)(4), 29 U.S.C. § 1391(c)(4),] or a comparable method approved under [ERISA section 4211(c)(5), 29 U.S.C. § 1391(c)(5).]"

29 U.S.C. § 1085(e)(9)(B). ERISA does not explicitly address whether the board of trustees of a multiemployer pension plan should include automatic employer surcharges in the board's calculation of a withdrawing employer's annual withdrawal liability payment pursuant to ERISA section 4219(c)(1)(C)(i).

B. Woodbridge's Complete Withdrawal From the IBT Local 863 Pension Fund

In February 2011, Defendant Woodbridge effected a " complete withdrawal" from the IBT Local 863 Pension Fund (the " Fund" ), a multiemployer pension plan, when it closed its Northern New Jersey facilities. (Def.'s 56.1 Stmt. ¶ 5, ECF No. 35-1; Pl.'s Resp. 56.1 Stmt. ¶ 5, ECF No. 38-1). At that time, Woodbridge was a party to three CBAs with the IBT Local 863 union that are relevant to this action:

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(1) the Warehouse CBA; (2) the Mechanics' CBA; and (3) the Porters' CBA. (Def.'s 56.1 Stmt. ¶ 1; Pl.'s Resp. 56.1 Stmt. ¶ 1; Markey Decl. Ex. C, ECF No. 35-4; Markey Decl. Ex. D, ECF No. 35-5; Markey Decl. Ex. E, ECF No. 35-6).

The three CBAs required Woodbridge to contribute to the Fund for every hour worked by each covered employee, with the hourly contribution rate hinging on the covered employee's classification. (Def.'s 56.1 Stmt. ¶ ¶ 1-2; Pl.'s Resp. 56.1 Stmt. ¶ ¶ 1-2). The hourly contribution rates under the three CBAs ranged from $1.50 to $3.69 per hour when Woodbridge withdrew from the Fund in February 2011. (Def.'s 56.1 Stmt. ¶ 2; Pl.'s Resp. 56.1 Stmt. ¶ 2). At that time, the Fund had been in " critical status" since the plan year beginning on September 1, 2008.[2] (Def.'s 56.1 Stmt. ¶ 3; Pl.'s Resp. 56.1 Stmt.¶ 3). As a result, Woodbridge had paid ten percent automatic surcharges on its contributions to the Fund for roughly two years before it closed its Northern New Jersey facilities. ( See Def.'s 56.1 Stmt. ¶ ¶ 3-4; Pl.'s Resp. 56.1 Stmt. ¶ ¶ 3-4).

C. The Board's Calculation of Woodbridge's Withdrawal Liability

The Board is responsible for generally administering the Fund and for carrying out the provisions set forth in the Local Union No. 863 I.B.T. Restated Pension Plan. (Markey Decl. Ex. B Art. VI, Sec. 6.01, ECF No. 35-3). Because Woodbridge effected a complete withdrawal from the Fund in February 2011, the Board had to perform two calculations. See 29 U.S.C. § § 1382, 1399(b)(1). First, the Board had to calculate the amount of Woodbridge's allocable amount of unfunded vested benefits under ERISA section 4211(c)(3). 29 U.S.C. § 1391(c)(3); (Markey Decl. Ex. B Art. XII, Sec. 12.03). Second, the Board had to calculate Woodbridge's annual withdrawal liability payment under ERISA section 4219(c)(1)(C)(i).

The Board's actuary, the Segal Company (" Segal" ), performed the two required calculations. (Def.'s 56.1 Stmt. ¶ 6; Pl.'s Resp. 56.1 Stmt. ¶ 6). First, Segal calculated Woodbridge's allocable amount of unfunded vested benefits to be $189,606,875. (Def.'s 56.1 Stmt. ¶ 6; Pl.'s Resp. 56.1 Stmt. ¶ 6). Second, Segal calculated Woodbridge's required annual withdrawal liability payment to be $8,553,551. (Def.'s 56.1 Stmt. ¶ 8, Pl.'s Resp. 56.1 Stmt. ¶ 8). Even at that annual rate, a portion of Woodbridge's allocable amount of unfunded vested benefits would remain unpaid after twenty years. ( See Def.'s 56.1 Stmt. ¶ 10; Pl.'s Resp. 56.1 Stmt. ¶ 10). Nonetheless, pursuant to ERISA section 4219(c)(1)(B), Woodbridge would only have to pay $8,553,551 annually for twenty years.[3] (Def.'s 56.1 Stmt. ¶ 10; Pl.'s Resp. 56.1 Stmt. ¶ 10).

In a demand letter dated April 29, 2011, the Board notified Woodbridge of its allocable amount of unfunded vested benefits and its withdrawal liability payment schedule, as required by ERISA section 4219(b)(1), 29 U.S.C. § 1399(b)(1). ( See Def.'s 56.1 Stmt. ¶ 9; Pl.'s Resp. 56.1 Stmt. ¶ 9). The demand letter requested ...


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